TransCanada Reports Strong First Quarter 2018 Financial Results
Diversified Portfolio of High Quality Assets Continues to Drive Record Performance
CALGARY, Alberta, April 27, 2018 (GLOBE NEWSWIRE) -- TransCanada Corporation (TSX:TRP) (NYSE:TRP) (TransCanada or the Company) today announced net income attributable to common shares for first quarter 2018 of $734 million or $0.83 per share compared to net income of $643 million or $0.74 per share for the same period in 2017. Comparable earnings for first quarter 2018 were $870 million or $0.98 per share compared to $698 million or $0.81 per share for the same period in 2017. TransCanada's Board of Directors also declared a quarterly dividend of $0.69 per common share for the quarter ending June 30, 2018, equivalent to $2.76 per common share on an annualized basis.
"During the first quarter of 2018 our diversified portfolio of high-quality energy infrastructure assets continued to perform very well," said Russ Girling, TransCanada's president and chief executive officer. "Comparable earnings per share increased 21 per cent compared to the same period last year despite the sale of our U.S. Northeast power assets, reflecting the strong performance of our legacy assets and contributions from approximately $7 billion of growth projects that were placed into service over the last twelve months. These included expansions of our NGTL and Canadian Mainline systems in our Canadian natural gas pipelines business, the Gibraltar, Rayne XPress, Leach XPress and Cameron Access projects in our U.S. natural gas pipelines business and the Grand Rapids and Northern Courier liquids pipelines in Alberta."
"Looking forward, we continue to advance our $21 billion near-term capital program with approximately $11 billion of projects expected to enter service by the end of 2018. This program is expected to generate significant additional growth in earnings and cash flow and support annual dividend growth at the upper end of an eight to ten per cent range through 2020 and an additional eight to ten per cent in 2021," added Girling. "We have invested approximately $7 billion into these projects to date and, despite recent significant changes to the MLP sector, are well positioned to fund the remainder through our strong and growing internally generated cash flow, along with a broad spectrum of financing levers including access to capital markets on compelling terms and potential portfolio management activities."
"In addition, we continue to advance more than $20 billion of medium to longer-term projects including Keystone XL, Coastal GasLink and the Bruce Power life extension program. At the same time, we expect to secure additional organic growth opportunities associated with our extensive and well-positioned North American footprint. Success in advancing these and other projects into construction and operation could extend our dividend growth outlook beyond 2021," concluded Girling.
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)
- First quarter 2018 financial results
- Net income attributable to common shares of $734 million or $0.83 per share
- Comparable earnings of $870 million or $0.98 per share
- Comparable earnings before interest, taxes, depreciation and amortization of $2.1 billion
- Net cash provided by operations of $1.4 billion
- Comparable funds generated from operations of $1.6 billion
- Comparable distributable cash flow of $1.4 billion or $1.64 per share reflecting only non-recoverable maintenance capital expenditures
- Declared a quarterly dividend of $0.69 per common share for the quarter ending June 30, 2018
- Placed approximately $160 million of NGTL facilities in service to complete the 2017 Expansion Program as well as the approximate $100 million Sundre Crossover project
- Successfully completed open seasons for NGTL securing contracts for 620 MMcf/d of incremental firm receipt service and 1.5 Bcf/d of existing and expansion export delivery capacity. These facilities are expected to result in an expansion program of approximately $2.5 billion
- Filed an NGTL application with the NEB for approval of a negotiated settlement with customers for 2018 and 2019
- Placed the US$1.6 billion Leach XPress and US$0.3 billion Cameron Access projects in service
- Received FERC approval for Great Lakes and Northern Border rate settlements
- FERC proposed changes related to a number of income tax matters with respect to pipeline ratemaking.
Net income attributable to common shares increased by $91 million to $734 million or $0.83 per share for the three months ended March 31, 2018 compared to the same period last year. Net income per common share in first quarter 2018 includes the effect of common shares issued in 2017 and 2018 under our DRP and corporate ATM program. First quarter 2017 results included a $24 million after-tax charge for integration-related costs associated with the acquisition of Columbia, a $10 million after-tax charge for costs related to the monetization of our U.S. Northeast power generation business, a $7 million after-tax charge related to the maintenance of Keystone XL assets and a $7 million income tax recovery related to the realized loss on a third party sale of Keystone XL project assets. All of these specific items, as well as unrealized gains and losses from changes in risk management activities, are excluded from comparable earnings.
Comparable earnings for first quarter 2018 were $870 million or $0.98 per share compared to $698 million or $0.81 per share for the same period in 2017, an increase of $172 million or $0.17 per share. Comparable earnings per share for the three months ended March 31, 2018 include the effect of common shares issued in 2017 and 2018 under our DRP and corporate ATM program. The increase in first quarter 2018 comparable earnings over the same period in 2017 was primarily due to the net effect of:
- a higher contribution from Liquids Pipelines primarily due to earnings from intra-Alberta pipelines placed in service in the second half of 2017, higher volumes on the Keystone Pipeline System and increased earnings from liquids marketing activities
- a higher contribution from U.S. Natural Gas Pipelines mainly due to increased earnings from Columbia Gas and Columbia Gulf growth projects placed in service, additional contract sales on ANR and Great Lakes and amortization of net regulatory liabilities recognized as a result of U.S. Tax Reform
- lower income tax expense primarily due to lower rates as a result of U.S. Tax Reform and lower flow-through income taxes in Canadian rate-regulated pipelines
- a higher contribution from Mexico Natural Gas Pipelines mainly due to higher revenues
- higher interest income and other due to realized gains in 2018 compared to realized losses in 2017 on derivatives used to manage our net exposure to foreign exchange rate fluctuations on U.S. dollar-denominated income
- lower earnings from U.S. Power mainly due to the monetization of U.S. Northeast power generation assets in second quarter 2017 and the continued wind down of our U.S. power marketing operations
- lower earnings from Bruce Power primarily due to lower volumes resulting from increased outage days
- higher interest expense as a result of long-term debt and junior subordinated notes issuances, net of maturities, partially offset by the repayment of the Columbia acquisition bridge facilities in June 2017.
Notable recent developments include:
Canadian Natural Gas Pipelines:
NGTL System: On April 9, 2018, we announced that the Sundre Crossover project was placed in service. The approximate $100 million pipeline project increases NGTL
capacity at our Alberta / B.C. Export Delivery Point by 245 TJ/d (228 MMcf/d), enhancing connectivity to key downstream markets in the Pacific Northwest and California.
The NGTL 2017 Expansion Program has also been completed with approximately $160 million of facilities placed in service since December 31, 2017, including the Northwest Mainline Loop-Boundary Lake pipeline on April 2, 2018. The 2017 Expansion Program added approximately 230 km (143 miles) of new pipeline along with additional compression facilities and increased the NGTL System capacity by approximately 535 TJ/d (500 MMcf/d).
On February 15, 2018, we announced the successful completion of an open season for 260 TJ/d (242 MMcf/d) of existing and 1.1 PJ/d (1.0 Bcf/d) of expansion export capacity at the Empress / McNeill Export Delivery Point, with the expansion service expected to commence in November 2020 and April 2021. The average awarded contract term for the expansion capacity was approximately 29 years. We also announced that we had separately secured contracts for 664 TJ/d (620 MMcf/d) of incremental firm receipt service beginning in April 2021. Together, the incremental receipt and export delivery contracts will drive a $2.4 billion expansion program, bringing NGTL's capital program to a total of $7.2 billion.
On March 20, 2018, we announced the successful completion of an open season for additional expansion capacity at the Empress / McNeill Export Delivery Point for service expected to commence in November 2021. The offering of 300 TJ/d (280 MMcf/d) was oversubscribed with an average awarded contract term of approximately 22 years. The facilities and capital requirements for the expansion are still being finalized and are currently anticipated to increase NGTL's capital program by a further approximate $120 million.
On March 23, 2018, we filed an application with the National Energy Board (NEB) for approval of a negotiated settlement with our customers and other interested parties on the annual costs required to operate the NGTL System for 2018 and 2019, along with final 2018 tolls and revised interim 2018 tolls. The settlement fixes return on equity (ROE) at 10.1 per cent on 40 per cent deemed equity. The NEB is reviewing comments from interested parties and we anticipate a decision on the application in second quarter 2018.
U.S. Natural Gas Pipelines:
Leach XPress: Leach XPress was placed in service on January 1, 2018. This Columbia Gas project transports approximately 1.6 PJ/d (1.5 Bcf/d) of Marcellus and Utica gas
supply to delivery points along the system.
Cameron Access: Cameron Access was placed in service on March 13, 2018. This Columbia Gulf project is designed to transport approximately 0.9 PJ/d (0.8 Bcf/d) of gas
supply to the Cameron LNG export terminal in Louisiana.
- Mountaineer XPress and WB XPress: In first quarter 2018, estimated project costs of US$3.0 billion for Mountaineer XPress and US$0.9 billion for WB XPress increased by US$0.4 billion and US$0.1 billion, respectively. These increases primarily reflect the impact of delays of various regulatory approvals from the Federal Energy Regulatory Commission (FERC) and other agencies, increased contractor construction costs due to unusually high demand for construction resources in the region, and modifications to contractor work plans and resources to maintain our projected in-service dates.